Exclusive Aquaculture Vaccine Technology Acquired

CHINA - An exclusive aquaculture vaccine technology has been acquired by Skystar Bio-Pharmaceutical Company from China's Fourth Military Medical University (FMMU). A collaborative research and development agreement for RMB 8 million (approximately $1.2 million) was also signed.

This grants Skystar, a China-based producer and distributor of veterinary medicines, vaccines, micro-organisms and feed additives, exclusivity on the patent through to 2012. The vaccine has been shown to be effective in treating and preventing bacterial infections in marine life without harmful side effects. According to CNNMoney.com, the patented technology is designed to address the Company-estimated $150 million underserved aquaculture market opportunity in China.

Skystar will manufacture its aquaculture vaccine in its new 51,000 square foot veterinary vaccine facility along with other vaccine products presently produced by the Company. To accommodate the new aquaculture vaccine line, Skystar now expects to complete the build-out of its new veterinary vaccine facility in the first quarter of 2010, rather than the fourth quarter of 2009 as previously anticipated. Based on the extended timeline, management currently expects full-year 2010 organic revenue to be between $44.0 to $46.0 million with gross margins between 48 per cent and 54 per cent.

"We have modified our short-term veterinary vaccine production goals to further our strategy of maximising our revenue stream potential through investments that we believe will ultimately accelerate our long-term growth," said Weibing Lu, Skystar's Chairman and Chief Executive Officer. "The purchase of this patented technology and execution of the cooperative research agreement with FMMU represent a significant opportunity for Skystar toward the Chinese aquaculture industry, which we believe represents a sizeable market that has gone underserved by pharmaceutical manufacturers. Our acquisition of this patented technology represents an important and exciting revenue opportunity."

"We continue to see considerable organic growth among our existing product lines and are on track to complete the build-out of our micro-organism facility by the end of this year. With the addition of this facility, we expect to see improved revenue contributions from our micro-organism products. We are now targeting approximately $11.0 million in revenue with gross margins of about 70 per cent from our micro-organism product line in 2010," he told CNNMoney.com.

"We believe that the bulk of our growth in 2010 will be from our veterinary medications and micro-organism product offerings. As we ramp up our veterinary vaccine facility, we believe we will see larger contributions from this facility in future periods. We see tremendous opportunity for our products and will continue to invest in and implement strategies that we believe will best position Skystar for creating long-term value for the Company and our shareholders," Mr Lu concluded.

Based on the addition of the aquaculture vaccine line and the resulting delay to the build-out of its new vaccine facility, Skystar now believes that its 2010 total vaccine revenue will be approximately $6 million with gross margins of approximately 60-70 per cent. The Company had previously targeted $14 million in revenue contribution from the new vaccine facility in 2010.

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